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April 23, 2021 02:54 PM

Biden infrastructure plan could be boost for tire industry

Jim Johnson & Erin Pustay Beaven
[email protected]
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    WASHINGTON — With hundreds of millions of tires rolling along the nation's roads every day, the importance of improving and maintaining America's infrastructure is obvious to the tire industry.

    With the latest round of COVID-19 relief now delivered, President Joe Biden's efforts to push for a massive infrastructure improvement plan is now a central issue for the new administration.

    "It's beyond question that the U.S. transportation infrastructure system … is woefully in need of upgrade and modernization," Anne Forristall Luke, CEO of the U.S. Tire Manufacturers Association, said.

    "We are very excited that the Biden administration is taking a bold approach and is passionately committed to infrastructure investment as a driver of economic growth."

    The White House has laid out a broad vision for infrastructure spending and the weeks and months ahead will see administration and legislators in both houses of Congress wrangle about the specifics.

    President Biden is calling for investments that not only repair critical components in transportation, water and energy, but also modernize and reinforce those areas as well. Doing so, he claims, prepares the U.S. better for next-generation, energy-efficient technology and addresses vulnerabilities exposed by climate change as well racial and socio-economic inequities.

    The administration also is betting that these investments lead to job creation, a key reason why the $2 trillion infrastructure proposal is dubbed the American Jobs Plan. It's not only an investment in "traditional" infrastructure — roads and bridges, homes and businesses, electrical grids, water systems, etc. — it also proposes investment in manufacturing, job training and education.

    Although it's labeled as a "jobs" plan, the proposal is, at its core, an infrastructure proposal. And, according to the administration, the U.S. infrastructure is long overdue for a hearty investment.

    "After decades of disinvestment, our roads, bridges, and water systems are crumbling. Our electric grid is vulnerable to catastrophic outages," the White House said. "Too many lack access to affordable, high-speed Internet and to quality housing."

    Roy Littlefield, CEO of the Tire Industry Association (TIA), certainly sees the need for a new infrastructure bill, but he has his reservations about how the country is going to get there.

    His concerns can be boiled down to one word: funding.

    And more specifically, Mr. Littlefield said he wonders how the country is going to pay for the work and how that will impact the tire industry.

    "It's really hard to figure how this is going to play out," he said.

    "Everybody in the country wants an infrastructure bill. But who pays for it is the big question always. How extensive does it get? Is it really for highways and bridges or is it going to reach out to all these other areas?" Mr. Littlefield asked.

    "I think both sides are going to try very hard, but there's no agreement right now. I would not be surprised if they kick the can again and extend it for another year. I don't think anybody wants to do that at this point," he said.

    Congress has been passing annual infrastructure-spending bills in recent years, essentially keeping the status quo as politicians debate a more-comprehensive, multi-year approach.

    Mr. Littlefield said former President Trump could not get a new infrastructure bill past because his proposal's large scope turned off certain legislators. He now raises the same question for Mr. Biden's plan.

    "You put all the taxes on people who drive trucks and cars and you extend it to everybody else for the benefits," Mr. Littlefield said about the idea to have a broadly focused infrastructure bill.

    While infrastructure funding could benefit projects outside of the traditional roads-and-bridges approach, Mr. Littlefield said he is concerned too many of the ideas to pay for the overall program are focused on the transportation sector.

    That includes ideas to put a tax on vehicle miles traveled, truck and automobile parts, increasing the current truck-tire tax and even reinstituting a passenger vehicle tire tax.

    "You've got over 40 proposals for raising taxes that are floating around Congress now. Everyone of them will have supporters Everyone of them are going to have opponents," Mr. Littlefield said.

    Another idea is to raise the corporate tax to 28% from 21% to claw back some of the money lost when the tax dropped from 35% during the Trump administration. While Mr. Littlefield said he does not see Republications supporting such a measure, he did allow that Democrats could push it through with a simple majority. One obstacle could be U.S. Sen. Joe Manchin, D-W.Va., who has come out against that idea.

    With the Senate split 50-50 Democrat-Republican, the Democrats and Independents who vote with them need every vote on their side of the aisle plus a tie-breaking vote from Vice President Kamala Harris to push this through.

    "Everybody wants a final bill, but there is a lot of compromise that's going to have to happen before it gets passed," Mr. Littlefield said. "Every day you get something a little bit different. I think what's happening now is they are throwing a wad up on the wall to see what sticks."

    The nation's trucking industry, represented by the American Trucking Associations (ATA), stands to benefit immensely from improved roadways and bridges.

    "The health of our economy, strength of our supply chain and safety of the motoring public require us to make big, bold investments in our nation's roads and bridges, and this plan would steer much needed funding to critical projects along our national highway system," the association said.

    ATA was pragmatic, however, pointing out it feels the administration's funding proposal isn't "politically tenable nor a reliable long-term solution" to the shortfall facing the Highway Trust Fund.

    "We also disagree with certain provisions — especially those related to labor — that are counterproductive to economic growth and will only serve as political poison pills."

    Nevertheless, the trucking industry is committed to being a constructive partner throughout the legislative process, the ATA said, "and will continue to work with lawmakers on both sides of the aisle on a funding mechanism that is equitable, sustainable, user-based and can provide the foundation our economy needs over the long-term."

    Improving roadways and bridges obviously will benefit the transportation sector — tire industry included.

    "Infrastructure investment is critical to our nation's economic competitiveness," Ms. Luke said. "It is critical to motorist safety. It is critical to saving consumers money. It is critical to environmental progress because it contributes to fewer greenhouse gas emissions from more efficient vehicle transportation.

    "It has the potential to contribute to cleaning up the environmental impact of the highways themselves by investing in research and development around creating highways of the future, more sustainable highways," she added.

    The American Society of Civil Engineers (ASCE), which studies the state of U.S. infrastructure regularly, offers quadrennial assessments of key facets such as roads, bridges, railways and energy grids. The latest report card, issued in February, examines the state of 17 separate areas across transportation, energy and public services.

    Overall, the ASCE gave U.S. infrastructure a C-.

    Eleven of the 17 evaluated categories received D ratings, including roads and transit. Bridges, meanwhile, scored a C.

    "This is not a report card anyone would be proud to take home," ASCE Executive Director Thomas Smith said. "We have not made significant enough investments to maintain infrastructure that, in some cases, was built more than 50 years ago.

    "As this study shows, we risk significant economic losses, higher costs to consumers, businesses and manufacturers — and our quality of life — if we don't act urgently," Mr. Smith added. "When we fail to invest in infrastructure, we pay the price."

    The ASCE contends that price comes in the form of job losses and out-of-pocket costs. Without urgent action,the ASCE estimates that 3 million jobs could be lost by 2039 and that American households, on average, will bear $3,300 in hidden costs per year.

    "If the U.S. does not pay its overdue infrastructure bill," the ASCE said in a statement, "by 2039 the U.S. economy will lose $10 trillion in growth, and exports will decline by $2.4 trillion."

    Should the plan take shape, especially in the broad context it has been proposed, the Biden administration maintains there could be job growth.

    In addition to the obvious benefits for the tire industry, there also is an opportunity to help close the loop by using more recycled tire rubber in roadway projects and civil-engineering applications, the USTMA said.

    Blending asphalt and rubber from scrapped tires is viewed as a way to not only find a use for recycled tires but also extend the life of roadways compared with the use of traditional asphalt.

    Used tires also can be used in a variety of ways in infrastructure construction projects, including retaining walls, slope stabilization and fill.

    Ms. Luke said her organization and its members are particularly interested in the use of tires to create this type of sustainable infrastructure that also can include stormwater infiltration galleries and bioswales.

    "Those are things that we see as tremendous both from a sustainability and environmental stewardship perspective," she said. "Those are areas where we both have the opportunity to grow sustainable markets for scrap tires and also have a very positive impact on the environment and on the development of the highway of the future."

    Moving quickly

    Ann Wilson, senior vice president of government affairs for the Motor & Equipment Manufacturers Association, sees the potential for movement on an infrastructure bill by July 4.

    "Infrastructure bills help all of us who are in transportation," Ms. Wilson said. "To have a solid infrastructure system in this country is a necessity for everybody who is involved in the vehicle industry. That's first and foremost."

    Ms. Luke said she expects the months ahead will include additional infrastructure improvement programs from federal legislators.

    "There's obviously a lot of road to travel, pardon the pun, in moving from the Biden administration's proposal to the various Congressional proposals that will come out," Ms. Luke said. "There's a long way to go here."

    In the plan presented in late March, Mr. Biden proposed investing $621 billion in transportation infrastructure and resilience. That includes $115 billion to modernize bridges, highways and roadways.

    But it's not just roads and bridges that are targeted for upgrades. The Biden plan proposes investments of $85 billion, $80 billion and $25 billion for transit systems, railways and airports, respectively.

    He's also suggesting $20 billion be set aside to address road safety and is pushing for a $50 billion investment to address the infrastructure vulnerabilities that have arisen with climate change.

    The Biden plan also proposes a $650 billion investment in infrastructure that improves the quality of life at home. This portion of the bill focuses on goals such as retrofitting homes and businesses for energy efficiency ($213 billion), expanding broadband internet access ($100 billion), rebuilding and upgrading infrastructure for drinking water and wastewater ($111 billion) and upgrading the electric grid ($100 billion).

    Ms. Wilson pointed to a couple key topics facing her membership.

    "I think the other thing we have to keep in mind when it deals with either safety or climate: Our members—component manufacturers—operate in a global climate," Ms. Wilson said. "For us to have a clear path forward on technology as well as climate technology allows our members to know where they need to invest, what they need to invest in and what the expectations of regulators are in this country.

    "But having said that, I think it's really important to realize this industry is in a transformational state."

    TB graphs by Michael McCrady

    Investments in job training, education, research and development, and manufacturing also are built into Biden's plan. The proposal, for instance, calls for $180 billion in strategic research and development investments that help firm up U.S. leadership in key technological areas such as artificial intelligence, biotechnology and computing.

    President Biden's plan also would change the tax code to discourage offshoring by U.S. companies and close some loopholes that help lower corporate taxes.

    This funding approach could prove problematic, NAM contends. "Raising taxes on manufacturers would fundamentally undermine our ability to lead this recovery," the association said.

    NAM contends that other revenue sources — including gas and VMT taxes — would be better options for supporting the infrastructure projects proposed.

    But the idea of a VMT tax makes TIA's blood boil as Mr. Littlefield said that would target the transportation industry and those who have to drive long distances in more rural areas unfairly.

    Those living in urban areas, who travel by car less or use public transportation, are more shielded from the tax, putting the onus on those who have no choice but to drive longer distances, he said.

    The TIA CEO brought up the possibility of Congress' extending infrastructure spending once again for another year under current guidelines.

    "You've got an extension which expires in September. It's very hard to say how this is going to go," Mr. Littlefield said.

    Related Article
    Editorial: All roads lead to infrastructure bill
    USTMA: Industry fared better than most during depths of pandemic
    Vaccine may usher sense of normalcy
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    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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